Car Dealerships and Wine Wholesalers: “Daddy, Please Help Me”

Posted by Tom Wark on Mar 13, 2014

Remember what happened back in grade school when the bully started telling you how it was going to be and you decided to push back. Immediately the bully would run to the principle in tears, tell a lie or two, then beg for protection.

Yes, I’m describing middlemen wine wholesalers who tend to run to daddy-lawmaker whenever they face the slightest bit of competition. They tell their lies about how the three-tier system is actually good for consumers or how children will get drunk on direct shipped wine, or how if they don’t get one-sided, protectionist Franchise laws they will go out of business. They cry like little girlswith a skinned knee, beg for help so they don’t actually have to provide good service and innovate, shove a few thousand dollars at daddy-lawmaker, then wipe their noses and go about their business.

The Tesla direct sales model threatens traditional auto dealers because direct from manufacturer sales saves consumers thousands of dollars and represents real innovation. It’s no different from direct to consumer sales from winery or retailer to consumers. Wholesalers hate it because it upsets their cozy, daddy-help-me, protected industry and protects them from actually having to innovate or provide a service with modern value.

“Rather than selling to dealerships, which then mark up the vehicles that we eventually buy, Tesla prefers to sell its cars directly to consumers. It’s not surprising that middleman dealerships would oppose direct sales, but it’s too bad that the dealers found an ally this week in New Jersey’s Republican Governor Chris Christie….New Jersey isn’t the only state where Tesla is having this fight, and car dealerships aren’t the only middlemen who run to politicians for legislative cover. For more than a decade wine retailers and wholesalers have been battling wineries that want to sell directly to consumers. But when protectionism prevails, competition is limited and consumers are worse off.”

It’s taken wine producers a millions of dollars in litigation, a Supreme Court Decision and years to open up 40 states for direct to consumer wine shipping. And even with that effort, 35 states still outlaw the delivery into their states of imported wines. Because the auto dealership franchises have the same “daddy-please-help-me” worldview, Tesla better gear up for a long fight.

6 Responses

Bob Henry - March 14, 2014

Tom,

One little known aspect of Tesla’s business model: reaping a Zero Emission Vehicle credit from each sale.

Reports the Los Angeles Times (May 5, 2013):

“. . . the state [of California] has created a system in which Tesla can make as much as $35,000 extra on each sale of its luxury Model S electric sports sedans. . . . The credits, coupled with state and federal incentives to buyers, can add as much $45,000 for each Model S sold. . . . These Zero Emission Vehicle credits could put as much as $250 million in Tesla’s coffers this year, according to one Wall Street analyst, and they are a key reason the 10-year-old automaker has survived this long. Tesla gets to sell the credits to other automakers that need them to satisfy tough California regulations.”

So their revenue on the $70,000 “baseline” model is more like $100,000.

And the revenue on their $100,000 top-of-the-line model is more like $135,000.

How much (if any) of that revenue they would have to share with independent dealers is unknown.

Too bad for the wine wholesalers. Serves them right when they lie to customers
such as telling them its illegal for them to purchase direct from a winery where its
not illegal to do so. Just make that sale at all costs boys n girls. This hurts consumers.
The wines they offer are plonk big name big production 4$ a bottle type.

Bob, I wouldn’t call that Tesla ZEV credits story “little-known” – it’s been all over the media since they first reported a profit. Couple of points. The “credits” are a legal fiction. They don’t get to book them as revenue until they sell them. And the price for these credits if going down as more come on the market, and as the companies that have been buying them as offsets reduce their own emissions.

As a grower, I wish I could sell credits for the excess carbon my vines pull from the environment.

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